U.S. auto sales remain soft in July

DETROIT Major automakers reported U.S. auto sales for July that were somewhat softer than expected as high U.S. unemployment and weak consumer confidence kept would-be buyers on the sidelines.

Industry sales were on track to jump 9 percent in July to 1.1 million vehicles, less than the growth of 10 percent or more expected by many analysts. Kelley Blue Book estimated that the annual sales pace for the month was on track to fall just shy of 14 million. Analysts expected the sales rate to be 14 million.

July auto sales showed the continuation of what has been a slowdown in growth since the late spring. Sales early this year shot past even the most bullish forecasts, but starting in May, the rate of improvement started to weaken.

"If we were talking in February this year and you asked me what we're going to have July, I'd say at least 14 and a half," said TrueCar.com analyst Jesse Toprak. "But we're going to barely get to 14."

General Motors Co forecast an annual auto sales pace for July between 13.9 million and 14.1 million vehicles. Ford Motor Co projected a sales rate of 14 million, including medium- and heavy-trucks, which typically adds 300,000 sales.

"It's the economy. There is no way around it," said George Magliano, senior economist with IHS Automotive. "In this kind of environment, it's very difficult for light vehicle sales to get any traction."

Lack of job growth and confusion about government policy on tax cuts and spending tempered sales in July, Magliano said.

In June, the annual pace of vehicle sales in the United States was 14.1 million. Toyota Motor Corp expects sales will come in at 14.3 million this year. GM projects the overall industry will sell between 14 million and 14.5 million.

SOME ENCOURAGING SIGNS

In conference calls on Wednesday, executives at General Motors and Ford said the U.S. job market and consumer confidence remain weak. Separately, the Federal Reserve said the U.S. economic recovery has lost momentum so far this year.

But GM and Ford executives also pointed to encouraging signs of economic growth, such as the pickup in the housing sector, which is tied to truck sales. Analysts and automakers also said better financing deals for consumers could also spur sales.

"We think some truck buyers have been reacting to the mixed economic signals of the last few months," said Kurt McNeil, head of GM's U.S. sales operations. "But recent reports of consumer confidence, home prices, and personal income were better than expected.

He added: "We expect all of these factors will help release more pent-up demand and drive truck share of industry higher in the coming months, which is the normal trend."

Car companies are anticipating a second-half sales increase spurred partly by the introduction of a slate of new models.

Major automakers are increasingly counting on the U.S. auto market to offset weak sales in Europe. Last week, Ford reported a more than $1 billion loss in Europe due to the deepening economic crisis in the region.

On Thursday, GM is expected to report second-quarter results. Its troubled Opel brand in Europe is considered one of the biggest risks to the company's health, analysts have said.

MISSED ESTIMATES

During a call with analysts and reporters, GM executives said they did not expect a change in marketing strategy after its top marketing executive, Joel Ewanick, was abruptly ousted earlier this week.

GM, the largest U.S. automaker, reported on Wednesday a 6 percent drop in July U.S. sales, while Ford posted a 4 percent drop. The smallest U.S. automaker, Chrysler Group LLC, posted a 13 percent increase.

GM and Ford both pinned their declines on lower sales to fleet customers like rental car companies. GM's fleet sales fell 41 percent, in line with the company's forecast last month.

But their overall results were still lower than some estimates. Analysts had expected better financing deals, pent-up demand and increased construction spending to offset the sluggish U.S. economy.

Toyota sales were up 26 percent to 164,898 in July. A year ago, Toyota was still grappling with major vehicle shortages stemming from the March earthquake in Japan. In a release, Toyota said customers were taking advantage of long-term, low-interest financing at low lease rates.

GM sold 201,237 cars and trucks last month. Ford, the No. 2 U.S. automaker, sold 173,966 cars and trucks. Chrysler, majority-owned by Italian automaker Fiat SpA, sold 126,089 cars and trucks.

Auto research firm Edmunds had expected GM to report 214,315 vehicle sales and Ford at least 175,791. Chrysler beat Edmunds' forecast for its sales but fell short of the Barclays Capital estimate of 129,453 vehicles and the RBC Capital Markets projection of 127,889.

Both Ford and GM attributed their sales declines to a drop in sales to fleet customers, such as rental car companies. GM's fleet sales fell 41 percent, in line with the company's earlier outlook, while Ford fleet sales dropped 16 percent. Fleet sales are less profitable than retail sales to consumers.

U.S. auto sales for Japan's Nissan Motor Co rose 16.2 percent in July to 98,341. German automaker Volkswagen AG said its VW brand sold 37,014 vehicles last month, up 27.3 percent from a year ago.

Ford shares were down 1.5 percent at $9.05 and GM shares were down a penny at $19.70 on Wednesday afternoon.

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